High-tech may boost office market, Cassidy Turley says

San Diego trails national vacancy rate

Atkins North America signed a $5.5 million, 94-month lease for 18,900 square feet at Gateway at Torrey Hills, an area that generally has lower office vacancy rates than the rest of the county, according to Cassidy Turley BRE Commercial. The firm's Joe Anderson, Rick Reeder and Dave Odmark represented the owner, Prudential Real Estate Investors, and Shawn Lorentzen of Jones Lang LaSalle represented Atkins.
— Cassidy Turley BRE

Atkins North America signed a $5.5 million, 94-month lease for 18,900 square feet at Gateway at Torrey Hills, an area that generally has lower office vacancy rates than the rest of the county, according to Cassidy Turley BRE Commercial. The firm's Joe Anderson, Rick Reeder and Dave Odmark represented the owner, Prudential Real Estate Investors, and Shawn Lorentzen of Jones Lang LaSalle represented Atkins.
/ Cassidy Turley BRE

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High-tech business may be the “something big” needed to jump start the commercial real estate market, according to Cassidy Turley Commercial Real Estate Services.

In its just-released “U.S. Macro Forecast” the company, which maintains offices in San Diego, said aside from apartments, commercial real estate will “slow for the remainder of 2011 but will reaccelerate in 2012.”

What could shake things up is “something big,” said chief economist Kevin J. Thorpe.

“Fortunately, something big might be in the works,” he wrote. “All of the technology surrounding social media/mobile technology...provides tangible signs that a major economic engine might be forming. Numerous businesses, such as Google, LinkedIn, Twitter, YouTube, Apple, Zynga, as well as many startups, are already putting in large requirements for additional office space, particularly in the California markets.

He said office rents in the Silicon Valley and San Francisco are “soaring.”

“It is too early to gauge how much net demand this area of the technology sector will ultimately generate,” Thorpe said, “but some believe it is in the embryonic stages of the next major boom.”

The report included national figures, none local. The San Diego research director, Jolana Campion, said she has just begun analyzing the second quarter data and not yet determined whether San Diego is ahead or behind the national trends. But figures she shared on offices showed the local rate at 19.6 percent, three points higher than the national rate of 16.5 percent.

Some key local submarkets are at or below the national figure, such as Mission Valley with 6.6 million square feet, 14.6 percent; Sorrento Mesa with 5.3 million square feet, 16.7 percent; Torrey Pines with 6.8 million square feet, 13.7 percent; and Kearny Mesa with 7.2 million square feet, 15.2 percent.

Others are well above the local average: Carlsbad with 4.1 million square feet, 29.5 percent; Del Mar with 4.4 million square feet, 20.9 percent; downtown with 9.8 million square feet, 20.9 percent.

The report says the national "overhang" of excess office space stands at 158 million square feet and it will take two or three years before that can be absorbed -- the same period for the 132 million square feet for industrial space to be aborbed. Retail's excess stands at 69 million square feet, but it will likely take longer to be aborbed.

"Given the numerous space options, U.S. rents will generally remain flat at least through 2012," Thorpe wrote. "Even under an optimistic scenario, rent growth in 2012 will fall well below the historical annual average of 3 percent."